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Wednesday, April 20, 2011

Political Viability Gap Funding

India's economy is still a cash economy, and Big Graft cash payments fit nicely with this.

ET Bureau, Apr 17, 2011, 10.00am IST

Do the math. For an assembly seat, you can by law spend Rs 16 lakh; for a parliament seat, Rs 40 lakh. These caps are low, as we demonstrated in an ET on Sunday story (The Great Indian Election Bait, April 3 issue). A candidate in an assembly seat needs to spend between Rs 50 lakh and Rs 1 crore.

In Tamil Nadu, with its thriving cash-for-votes culture, you might need to spend as much as Rs 8 crore in an assembly constituency. On an average, a Lok Sabha seat is made up of 7.6 assembly constituencies. So, the math suggests that you'd need anything between Rs 4 crore and Rs 40 crore to fund a Lok Sabha campaign.

Going by these numbers, the Congress and the BJP, which contested 440 and 433 constituencies respectively in the 2009 Lok Sabha elections, would have needed to mobilise about Rs 2,000 crore each. The DMK, even though a regional party contesting 22 seats in Tamil Nadu, could have splashed out close to Rs 900 crore in the Lok Sabha polls. Sharad Pawar's well-funded NCP fought 68 seats in 2009, and could have shelled out around Rs 500 crore for the campaign.

Remember, splurging doesn't guarantee a win. And this is just election spending. Parties need a lot of money to run their operations, paying workers, rent, fuel bills and so on. All this is Big Money. Big Business can give it by cheque. In fact, if businesses do not want tax breaks, there's no limit under law for political contributions. So, why isn't there a transparent system of cheque payments that would disincentivise Big Graft?

Two reasons. First, companies want the anonymity that comes with cash payments. This avoids questions on why party A was given more than party B. Second, much of India's economy is still a cash economy, and Big Graft cash payments fit nicely with this.